ACCOUNTING & ACTUARIAL SCIENCE (AN EMPIRICAL SEARCH FOR THE MEETING POINT)

BY

YOHANNA G. JUGU, PhD, ACA [email protected], +234803657607

KAMSEN MORDECAI DAPIM, MSc (Econs), CNA [email protected],+2348033736602

IKEOBI NNEKA (PhD in view), ACA [email protected], +2347057452645

AJITA SULEIMAN (MBA) [email protected], +2348055876366

ADOJA OLADAPO, BSc (statistics) [email protected], +2348138338932

and

WILLIAMS BETHEL, BSc (maths) [email protected], +2348168388349

1 ABSTRACT The survival and performance of any 21st century enterprise is highly dependent on the roles played by both Accountants and Actuaries. From the literature, no work has been done to resolve the assumption that and accountant can or cannot practice as an actuary or to find out the relationship between accounting and actuarial science. This deficiency clearly shows the gap in literature. The question that will readily come to mind is “What is the linkage be accounting and actuarial science”? To answer this question, we set and achievable objective that says “To examine the link between accounting & actuarial science. To achieve this objective, we employed both primary and secondary data using questionnaire to collect responses from sampled stakeholders besides review of curricula of professional bodies and academia of which a portion of the former was used to test our hypothesis. From our analysis, it was discovered that Accountants and Actuaries can only do the Job of each other to a small extent; and that an Actuary contributes significantly to the work of an accountant, particularly in the area of financial reporting. With this key discovery, we conclude that meeting point between accounting and actuarial science is in the area of financial reporting. Based on these and many other findings, we recommend that cooperation in the area of assignments between the two professions should be encouraged at all times, and Actuaries should continue to make significant contributions to financial reporting in view of its importance.

Key words: Accounting, Actuarial, Linkage, Financial Reporting and Profession

2 1.0 INTRODUCTION

The fact that the accounting profession has many linkages with other professions cannot be disputed. In the truest sense, accounting is a multi-disciplinary profession that interlocks with many other professions and requires the skills of these professions to be able to function well in all fields of endevour. With all these facts, it does not have with every profession and even where it does, to some varying degrees. Accounting is quantitative, scientific, business and legal inclined in nature, so also is actuarial science. The need to find out the specific points where the duo meets and the extent in which they meet are the focus of this paper. The paper commences with the provision of a good background of the subject matter, followed by establishing some achievable objectives and then a statement of testable hypothesis is made. Empirical researches of relevant materials and curricula of the two professions are thoroughly reviewed, while an appropriate methodology is adopted for the achievement of the stated objectives.

1.1 BACKGROUND Actuarial science and accounting have key roles in relation to an entity’s financial reporting arrangements. The conditions of their respective activities, including acts of communications with stakeholders are supposed to be set out and form part of their key functions. There are many areas where activities of an actuary interact with that of the accountant. One of the perceived areas relates to issues of pension schemes, insurance policies and the associated entity’s pension costs and disclosures (Lepădatu, 2012).

Accounting has to do with the past, present and future events. In many organizations, plans are made and converted to monetary quantities through the process of budgeting. Any income earned and expenditure incurred in relation to these budgets are usually documented in some well organized books. Tracks of cashflows, inventory and personnel costs are kept with the aid of cash book and stock book. The essence of collecting, processing and the maintenance of accounting data on these records are mainly for the purpose of financial reporting.

3 Financial reporting encompasses issues that have to do with finance, management, environment, and employees’ benefit plans. Because of the issues involved in this form of reporting, skills from many disciplines are required for the feat. For instance, report on employees benefit plan requires support and opinion of an actuary just like the revaluation of fixed assets will require the certification of an Estate Valuer or a quantity surveyor.

Actuaries are professionals that have undergone the rigour of actuarial science programmes. The science of actuaries is generally considered to be part of the field of business, which applies the use of mathematical and statistical methods to assess and manage risk in the insurance, pension, financial and business worlds. Again, in the more comprehensive meaning of the term, actuarial science includes an expert knowledge of the principles of compound interest as well as the laws of insurance probabilities. Suffice it to say that all these are not enough, the use of mathematical models is considered helpful for improving financial decision-making and they help to enhance the way financial implications of uncertain future events are evaluated. In a nutshell, Actuarial science includes a number of interrelated fields, such as mathematics, statistics, probability, finance, economics and accounting. Actuarial science draws supports and provides technical assistance to professionals in many fields of endeavour.

1.2 STATEMENT OF THE PROBLEM The crux of the issue of a topic on accounting and actuarial science is the need to identify the meeting point of these two fields of endevour, where professional accountants and actuaries can appreciate each other and be unhesitant to seek for assistance from each other. At some time in Nigeria, a group of accountants and economist went to the National Assembly to seek for the law that will enable them practice as actuaries in Nigeria. To their dismay, their requests were turned down after the first reading on the verity that the group was not a group of actuaries and have no requisite qualifications. This singular act portrays the feelings among some professionals that the job of an actuary can be done by anyone.

Accountants over the years have been practicing their profession, tackling many challenges which they come across. Issues that have to do with oral testimonies, economic issues, tax

4 matters and pension issues are some of the matters in which the accounting profession deals with. It is obvious that an accountant can or cannot practice as an actuary is still an issue that has not been resolved. This deficiency clearly shows the gap in literature. Therefore, this paper is set out to passionately fill this gap.

1.3 RESEARCH QUESTIONS i. What are the requirements for admission into Accounting and Actuarial Science undergraduate programmes? ii. What are the common course contents between Accounting and Actuarial Science undergraduate programmes? iii. What are the common course contents between Professional Accountants and Actuaries qualifying examinations? iv. What are the common functions of the Accounting and Actuarial science professions? v. What contribution can an actuary make in financial reporting?

1.4 OBJECTIVE The main objective of the study is to examine the link between accounting & actuarial science. While the specific objectives are to: i. analyse the requirements for admission into Accounting and Actuarial Science undergraduate programmes; ii. identify the common course contents between Accounting and Actuarial Science undergraduate programmes; iii. identify the common course contents between Professional Accountants and Actuaries qualifying examinations; iv. examine the common functions of the Accounting and Actuarial science professions; and v. assess the contribution that an actuary can make in financial reporting.

1.5 HYPOTHESIS

5 The study has formulated a hypothesis that will be subjected to a statistical test in the course of this research. The hypothesis is posed in the null form as follows: “The contribution of an actuary in financial reporting is not very significant”.

2.0 REVIEW OF RELATED LITERATURE The literatures on accounting and actuarial science are in most cases discussed independently and separately. However, from the many separate library and empirical studies, issues of common interest are discussed. This chapter discusses logical and vividly the concepts and theories surrounding our studies. Academic and professional curricula are systematically reviewed so as to bring out any commonality between them.

2.1 CONCEPTUAL FRAMEWORK Accountants often work with almost the same information with actuaries. However, the two professionals perform very different business functions. They handle detailed financial data, generate statistics and provide information to help managers make important organizational decisions. Yet for all their similarities, they each serve a different purpose for an organization. Understanding the link and difference between them lies in the knowledge of what each of them does, and what functions they perform for an organization. This section of the paper reviews relevant concepts surrounding our topic and identifies theories that support the study.

2.1.1 The Concept of Accounting Accounting originated from Mesapotamia, during the Babylonian imperialism in the year 4,500 BC (Jat & Jugu, 2014). It is divided into several different areas including financial accounting, managerial accounting, information systems, tax, consulting, auditing, and forensic accounting (Hopwood, Leiner & Young, 2012). The study of the science of accounting gives the basic accounting and financial understandings and foundational skills for students to develop as they advance through their undergraduate accounting courses. To acquire these skills, one needs the knowledge of basic accounting principles, mathematics, statistics and probability, business and management principles. With the possession of these requisite skills, an accountant can work in all fields of human endeavours, assisting other professionals to carry out their assignments effectively.

6 Accounting is defined as the recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial information for decision making and judgement (Jat & Jugu, 2012; and Hopwood, Leiner & Young, 2012). Accounting is an evolving profession, which differs from other traditional professions in the sense that the former involves the use of diverse knowledge to objectively determine facts in a manner that can support reasonable positions to be taken in a business (Jat & Jugu, 2012), while the latter may involve the use of rule of thumb in making decisions and judgements. The study of financial accounting, financial management, management accounting and currently, forensic accounting which are in most cases, collectively referred to as “Accounting” are taught as majors in most tertiary institutions with course linkages to the subjects of other disciplines (Feleagă, 1999).

2.1.2 The Concept of Actuarial Science Actuarial science is generally considered to be part of the field of business, and applies the use of mathematical and statistical methods to assess and manage risk in the insurance, financial and business worlds. Again, in the more comprehensive meaning of the term, actuarial science includes an expert knowledge of the principles of compound interest as well as the laws of insurance probabilities. The use of mathematical models is considered helpful for improving financial decision-making and enhancing the way of evaluating financial implications of uncertain future events. In a nutshell, Actuarial science includes a number of interrelated fields, such as mathematics, statistics, probability, finance, economics and accounting (Trowbridge, 1989).

2.1.3 Functions of an Accountant Accountants work with the monetary transactions of an individual or organization. The duties of accountants vary from recording transactions to advanced financial analysis and reporting. They may also help prepare tax returns and submit payments to the proper agencies. Chartered and Certified accountants obtain special certification that, according to accounting professional bodies in Nigeria, allows them to audit accounts for private businesses and public organizations as well as act as consultants on a wide variety of financial, business and tax topics.

7 2.1.4 Functions of an Actuary Actuaries evaluate the statistical probability of an event occurring in the future and estimate the likely financial impact of that event. Most often they evaluate the risk of adverse events such as accidents or natural disasters. According to the Society of Actuaries, the majority of actuaries are employed by the insurance industry. They help insurance companies decide which customers to insure and how much to charge in premiums. Actuaries may also be used in any business setting to determine the level of risk for an event and its likely financial impact, and proposes methods to prepare should that event occur (Grubbs, 1999)..

2.1.5 Similarities between an Actuary and Accountant Actuaries and Accountants both specialize in collecting and analyzing data, especially financial information. Actuaries and accountants sometimes work together, each using the information generated by the other in their own work. Both generate reports that help managers make critical decisions affecting the future of the organization. Because their areas of expertise overlap, professionals in both fields require knowledge of current business and accounting practices, statistics, economics, taxes and law to perform their duties. To become an actuary or accountant, you must have been trained in the area of financial mathematics and acquire the skills that will enable you perform financial analysis, risk analysis, mergers & acquisitions analysis, security analysis, tax analysis and budget analysis (Wiley IFRS, 2005).

A key linkage of accounting and actuarial science is in the area of Financial Mathematics. Both the accountant and actuary require skills of compounding, annuities and perpetuities which are all developed from the acquisition of a sound knowledge of financial mathematics.

The application of mathematics on financial markets is called mathematical finance or financial mathematics. Accounting and Actuarial science apply financial mathematics models and techniques on issues relating to financial risk or asset management. While accountants and actuaries give answers on how finances should be handled, a financial mathematician deals with investment banks, hedge funds and commodity traders. Another fact about financial mathematics is that it is related to computational finance.

2.1.6 Concept of Financial Reporting

8 Financial reporting serves as a means to communicate a company’s financial results and health. Financial reporting is accomplished through a series of financial statements that consolidate a company’s transactions and events into a summarized form under specified accounting rules. The purpose of these rules is to provide companies with a framework for measuring and recording transactions and the related revenue, expenses, assets and liabilities on a consistent basis. Financial reports enable stakeholders and regulators to track financial performance, compare a company’s performance to others and make informed financial decisions under a set of common rules (Odomirok, McFarlane, Kennedy & Brenden, 2014).

Relationship between Practicing Accountants and Actuaries in Financial Reporting - The two main relationships between practicing accountants and actuaries are those between the employer accountant and employer actuary and between the scheme accountant and scheme actuary. The principles underlying communications between the two professionals are generally the same, for example in both professional relationships the practicing accountants and actuaries obtain permission from their mutual client before communicating directly with each other, and one element of the communication will concern the timetable for the work to be undertaken.

Again, it is not necessary for two professionals to communicate with each other if the necessary information can be obtained from the employer or scheme trustees: the nature and extent of the communication should be tailored to the individual circumstances of each assignment. It is not intended that there should be a routine exchange of written questions and answers. The information required may already be available in formal reports. Further information deemed relevant to each circumstance may well be exchanged orally, in meetings and informal discussions. The starting point for relevant information should be the mutual client and it will normally be appropriate to keep the client informed of any communications between professional accountants and actuaries.

The relationship between the actuary and external auditor and in the preparation and audit of financial reports - The IAIS (2009) recognises the importance of the application of actuarial expertise and the role of external audit within the context of financial reporting by an insurer to the supervisor, and as part of an insurer's overall governance system:

9 1 Because the supervisory process relies heavily upon financial reports, both the actuary and the external auditor are important within a supervisory framework. 2. The IAIS Insurance Core Principles (ICP) make numerous references to both actuaries and the external auditor. The following ICPs include references to the responsibilities of the actuary or external auditor, or both: ICP 1: Conditions of effective insurance supervision ICP 7: Suitability of persons ICP 9: Corporate governance ICP 10: Internal control ICP 12: Reporting to the supervisor and off-site monitoring ICP 13: On-site inspection. The IAIS (2009) believes that the roles of the actuary and the external auditor, and the relationships between them and with the supervisor, are enhanced by: • a clear description of their respective roles and responsibilities • effective communication between them, where appropriate. 4. At the international level there is currently no comprehensive source of information or guidance to insurance supervisors regarding the relationship between the actuary and the external auditor and the communication between the two and with other stakeholders involved in the financial reporting process, within the context of the preparation and audit of financial reports of an insurer (although certain jurisdictions have produced such guidance) (IAIS, 2009). The Role of the Actuarial Valuation Report in Plan Funding -The actuarial valuation report has always played an important role as the basic source document for information regarding actuarially determined contributions1 and the funded status of pension and other post- employment benefit (OPEB) plans. The actuarial valuation report, prepared in accordance with Actuarial Standards of Practice (ASOP), will soon come to play an even more critical role in the wake of the implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, because funding information for pensions will no longer automatically be provided in financial reports. That is, the actuarial valuation report will soon be the sole source of information for many financial decision makers desiring to make informed decisions about the funding of pension benefits (GFOA, 2013). 10 GFOA recommends that state and local government finance officials and others with decision- making authority carefully review and understand their actuarial valuation report and use the information it contains to make policy decisions that ensure that pension benefits are funded in a sustainable manner, consistent with the pension funding guidelines developed by GFOA and the other major state and local government professional organizations (GFDBP, 2013). Reviewing and Understanding the Valuation Report - The purpose of an actuarial valuation is 1) to determine the amount of actuarially determined contributions (i.e., an amount that, if contributed consistently and combined with investment earnings, would be sufficient to pay promised benefits in full over the long-term) and 2) to measure the plan’s funding progress (GFOA, 2013). Key items to consider in reviewing the valuation report include:  Actuarially Determined Contribution. The actuarially determined contribution represents the amount needed to fund benefits over time. If the contributions are not fully paid, interest accrues on the unpaid portion at the plan’s expected long-term rate of return (Actuarial Standards Board, 2010). Persistent underfunding will ultimately jeopardize the plan’s sustainability. The GFOA recommends that the full amount of the actuarially determined contribution be paid to the plan each year.  Liabilities, Assets, and Funded Ratio. The actuarial accrued liability (AAL) represents the present value of benefits earned, calculated using the plan’s actuarial cost method. The actuarial value of assets (AVA) reflects the financial resources available to liquidate the liability. The unfunded actuarial accrued liability (UAAL) is the difference between the AAL and the AVA. The funded ratio (AVA/AAL) reflects the extent to which accumulated plan assets are sufficient to pay future benefits. The GFOA recommends that the funding policy aim to achieve a funded ratio that approaches 100 percent, with asset smoothing and amortization methods consistent with the government’s funding policy and ASOP.  Actuarial Assumptions. Since the future is unknown, actuarial valuations must be based on assumptions. For an actuarial valuation to be reliable, the assumptions used should reflect the best information available, which should be supported by rigorous discussion and analysis. Likewise, information concerning the demographic characteristics of the covered population needs to be current.

11  Historical Information. Certain historical information is especially useful for understanding funding:

o Multi-year information on the plan’s funding progress that includes the AAL, the AVA, the funded ratio, and the UAAL as a percentage of payroll, consistent with the government’s funding policy; and

o Multi-year information on both actuarially determined contributions and actual amounts contributed (by definition, if actuarially determined annual required contributions are paid faithfully each year to the plan, the plan should accumulate sufficient resources over time to pay benefits, regardless of the actuarial cost method selected). In both cases, the number of periods for which data are presented should be sufficient to allow for the meaningful analysis of trends (e.g., 6 to 10 years and longer if available).  Actuarial Comments. Actuarial Standards of Practice (ASOPs) require actuaries to make certain disclosures in their reports. These disclosures are commonly presented as comments intended to help users understand the report and include: 1) the report’s intended purpose; 2) cautions regarding risk and uncertainty; and 3) constraints regarding the use of the report for other than its intended purpose. In addition, if a prescribed assumption or method is used that the actuary believes is unreasonable or conflicts with the ASOPs, the actuary has a duty to disclose that fact in the report (California Actuarial Advisory Panel, 2011)  Information Needed to Prepare Financial Reports. The actuarial report may also provide all of the information needed to prepare the government’s financial reports in conformity with generally accepted accounting principles (GAAP) or legal or contractual requirements. This information may be provided as part of the valuation report or through a separate actuarial report.  Other information. An actuarial valuation report also may include: 1) projections of future contributions and funded status; 2) an analysis of the impact of potential changes in actuarial assumptions; and 3) the impact of economic volatility on the plan’s contributions and funded ratio. Recommendation:

12 Using the Actuarial Report to Make Appropriate Decisions - The information contained in an actuarial report is complex and can be difficult to understand for those who are not accustomed to working with this kind of information. For this reason, simply providing a copy of the actuarial report to decision makers does not ensure that everyone has a full understanding of its short-term and long-term implications. In most governments, the finance officer is in the best position to communicate the contents of the actuarial report, as the finance officer is familiar with the nuances of the actuarial report and is also intimately familiar with the organization’s financial situation. Accordingly, the first step toward using an actuarial report to make appropriate decisions is for the finance officer to communicate the information the report contains to decision makers and the general public in a clear and understandable manner (GFOA, 2013). Effective communication is especially important when changes to benefits are being considered.

To draw full benefit from the information contained in an actuarial report, the review of the information it contains must be followed by appropriate action steps:  Making Required Contributions. The key purpose of an actuarial valuation is to inform plan sponsors of the amount that needs to be contributed each year to adequately fund benefits. Consequently, the first action step is to take appropriate steps to ensure that actuarially determined contributions are faithfully paid to the plan each year. If those contributions are not made, follow-up action should be taken to understand the underlying cause of the underfunding and to resolve it.  Assessing Funding Progress. Historical information should be used to assess funding progress (e.g., Is the plan’s funded ratio improving over time? Is the rate of improvement consistent with the employee’s funding policy?).  Mitigating Risks. Information from the actuarial valuation can help to uncover risk exposure related to the funding of benefits. Decision makers should identify those risks and take appropriate and timely action to mitigate them. For example, if the valuation shows a high degree of asset volatility, it may be prudent to lower that volatility through adjustments to asset allocations or by other means, such as examining the methodology used to determine the actuarial value of assets.

13  Ensuring Reliable Data. For an actuarial valuation to be reliable, the underlying data must be reliable as well, including the demographic information related to plan members, the economic information related to investment returns and payroll growth, and the detailed descriptions of current benefits. Employers should work closely with the actuary to ensure that reliable information is provided in a timely manner.  Validating Methods and Assumptions through Experience Studies. The reliability of an actuarial valuation also depends on the use of reasonable methods and assumptions. Experience studies, performed no less frequently than every five years, can help to ensure the assumptions are in line with the plan’s demographic and economic experience, or can be used as a guide to make necessary changes. Likewise, a comprehensive audit of the plan’s actuarial valuations performed by an independent actuary at least once every five to eight years can be used to evaluate the appropriateness of the actuarial methods, assumptions, and their application.

2.3 REVIEW OF CURRICULA 2.3.1 Review of Admission Requirement Accounting and Actuarial Science Programme Admission Requiement The starting point for every profession is the acquisition of the minimum entry requirement as given by regulatory authorities. From available literature, actuarial science degree programmes are run by conventional universities only. Hence, this paper reviewed the Nigerian Universities Commission (NUC) minimum benchmarks for admission requirements into Nigerian Universities. Below are the criteria for admission into the undergraduate programmes as stipulated by NUC Benchmarks –Admin & Mgt (2007):- Universities Matriculation Examination (UME): The minimum academic requirement is credit passes in five subjects including English Language, Mathematics and Economics at not more than two sittings. Applicants for Actuarial Science must possess a credit pass in Further Mathematics. Direct Entry Admission (DE): (a) Applicants should possess five credit passes in the GCE or equivalent examination, at least two of which shall be at the Advanced level or four credit passes at least three of which shall be at the Advanced level provided that subjects

14 are not counted at both levels of the examination. Credit passes at the Ordinary Level must include English Language and Mathematics and, for those who wish to read Actuarial Science, Mathematics must be passed at Advanced Level. (b) OND in relevant discipline with at least upper credit grade in addition to the five credit passes as in 1.3.2(a) above. (c) HND in relevant discipline with at least lower credit in addition to five credit passes as in 1.3.2(a) above. (d) Final Certificate of relevant Professional Bodies in addition to five credit passes as in 1.3.2(a) above. 2.3.2 Review of Course Contents To identify the link between accounting and actuarial science, a thorough review of the NUC curriculum was reviewed. Table 1 and 2 in appendix 2 provide the course contents for the two academic programmes. For Accounting and Actuarial professional bodies usually provide written examination for all their student members. The bodies have syllabi for examining their members at different levels. In the light of this, the paper has reviewed the syllabi of two professional bodies: The Institute of Chartered Accountants of Nigeria (ICAN) and Institute and Faculty of Actuaries (IFA), United Kingdom. ICAN is one of the leading professional accounting bodies in world while IFA is the leading professional actuarial body. From the review, the two professional bodies have courses such as business, finance and finance reporting that are common.

3.0 METHODOLOGY The research design adopted for the study is both exploratory and descriptive. It is also qualitative and quantitative. The use of both primary and secondary data is employed and the source of the primary data is drawn from views of practicing accountants and actuarial science academics, while the secondary data are drawn from a thorough review of accounting and actuarial science curricula. The secondary data have enabled us to extract qualitative information that has helped answering research questions one to three, while the primary data have helped us to attain to research questions four and five, and to test our hypothesis. Samples of 40 professionals were taken and were served with questionnaires hand-to-hand or through their emails. The accountants were drawn from the 2015 National Accountants 15 Conference organized by the Institute of Chartered accountants of Nigeria (ICAN), the actuarial science academics were drawn from the University of Jos and University of Lagos. To test our hypothesis, we employed the one-way ANOVA. The use of this statistical tool has enabled us to ascertain the extent of the actuary contributions in financial reporting.

4.0 DATA ANALYSIS AND DISCUSSION OF FINDINGS

Forty (40) questionnaires were sent out to our target respondents. Out of this number, only 37 were filled and returned. Those that have responded comprise of 29 professional accountants, 3 actuarial science academics and 5 other professionals, who do not, regarded themselves as any of the two professionals.

Figure 1: Showing the Histogram of Profession of Respondents

Out of all the respondents who attained to our questionnaire, some did not address all the questions posed to them. The working experience of respondents was adequate as most of them were people with an average of 10 years working experience.

Reponses from section B of the questionnaire were very encouraging. All of the respondents have agreed that accounting and actuarial science have certain things in common. In their opinion, they stated that professionals from the two professions require a good knowledge of mathematics and statistics for carrying out their assignments. They are also of the opinion that 16 accountants and actuaries are both involved in measuring profitability and managing business risks.

81% of our respondents have also agreed that an accountant can do the work of actuary, however only 68% of them agreed that an actuary can do the work of an accountant. Furthermore, most of our respondents are of the opinion that accountants and actuaries can only do the jobs of each other just to a small extent. On the common functions of both accountants and actuaries, many of the respondents are of the opinion that the duo has nothing in common. They have provided the common functions of an accountant to include audit of accounting records, maintaining control and safe guarding asset, analysing accounting statement, assisting in investing in the capital market, budgeting and forecasting, assurance services and risk management While the common functions of an actuary, as provided by the same respondents include risk assessment and management, assurance services, investment appraisal, insurance and pension benefits calculation, valuation assets and liabilities and forecasting and projection. From the Table 5 in appendix 2, using audit risk assessment as a factor to test the extent to which an actuary can contribute to financial reporting, it has been determined that the respondents are of the opinion that the contribution of an actuary to employee benefit plans, investment appraisal, portfolio management, employees’ fidelity insurance arrangement and profit forecast is very significant since the P-values are less than 0.05 respectively for all the variables. The summary of the P-values is averaged 0.025 which is less than 0.05 level of significance, meaning that our null hypothesis should be rejected and the alternate be upheld meaning, that the contribution of an actuary in financial reporting is very significant.

5.0 SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1. SUMMARY

From the literature review, data analysis and discussion of findings, it was found that:

17 1. The entry requirement for admission into Accounting programme and Actuarial Science programme is the same except that a credit pass in further mathematics is required for Actuarial Science applicants;

2. The Actuarial Science degree programme is run by conventional Universities only;

3. Accountants and Actuaries can only do the Job of each other to a small extent;

4. The two professional bodies have standards for entry into the profession with similarities in the professional course contents on areas such as financial reporting and Finance;

5. There are some similarities in the academic programme between Accounting course contents and Actuarial Science course contents at the undergraduate levels. These are in the areas of Analysis for Business decision and Business Policy;

6. Accountants and Actuaries have some functions in common; these are in the areas of investment appraisal, Risk Management and Profit forecasting; and

7. The contribution to financial reporting by the Actuary is highly significant.

5.2 CONCLUSION

The survival and performance of any 21st century enterprise is highly dependent on the roles played by both Accountants and Actuaries. This study has been able to reveal that an Actuary contribute significantly to the work of an accountant, particularly in the area of financial reporting. With this key discovery, we conclude that the commonness meeting point between accounting and actuarial science is in the area of financial reporting.

5.3 RECOMMENDATIONS

From the above findings, the following are recommended: 18 1. Though the entry requirements for admission into Accounting and Actuarial Science programmes into undergraduate is not the same. It is recommended that it should be maintained since Actuarial Science programme is more quantitative than Accounting.

2. Just as accounting is run in polytechniques and other diplomas awarding institutions, actuarial science programme should take the same pattern as this will enhance acceleration of the new profession.

3. Cooperation in the area of assignments between the two professions should be encouraged at all times.

4. Entry requirements into the two groups of professional bodies (Accounting and Actuarial Sciences) should be maintain in the meantime, until the undergraduate programmes of the two professions are further blended;

5. It is recommended that the similarities in academic programmes (courses) between the two programmes (Accounting and Actuarial Science) should be improved to ensure effective collaboration between students of the two professions.

6. All courses that provide skills for investment appraisal, risk management and profit forecasting should be embedded in the two programme curricula since the duo has common functions in this two areas;

7. Actuaries should continue to make significant contributions to financial reporting in view of its importance.

REFERENCES

19 Lepădatu, G. V. (2012). The actuarial accounting in the modern financial-accounting management with applications to the entities. International Journal of Academic Research in Accounting, Finance and Management Sciences, Volume 2, Issue 3

Wiley IFRS (2005). Interpretation and Application of the International Accounting and Financial Reporting Standards (Copyright 2005 John Wiley & Sons, Inc.) BMT Publishing House, Bucharest, 2005 (Translation and interpretation by Mirela Păunescu).

Jat, R. B., and Jugu, Y. G. (2012). Modern Financial Accounting: Theory and Practice (2nd Edition): Ehindero Nigeria Ltd, Jos.

Jat, R. B., and Jugu, Y. G. (2014). Modern: Theory and Practice (IFRS & IPSAS Edition): Ehindero Nigeria Ltd, Jos.

Hopwood, W., Young, G. and Leiner, J. (2012). Forensic Accounting and Fraud Examination. New York, NY: Irwin Professional Publications.

Feleagă N. (1999). Compared Accounting Systems, Economic Publishing House, Bucharest.

Grubbs, D.S. (1999). The Public Responsibility of Actuaries in American Pensions, North American Actuarial Journal 3(3), 34–41.

Trowbridge, C. L. (1989). Fundamental Concepts Of Actuarial Science (Revised Edition). Actuarial Education And Research Fund. Library of Congress Cataloging-in-Publication

Institute and Faculty of Actuaries (2015). Institute and Faculty of Actuaries Syllabus for the Exams. http://www.actuaries.org.uk/students/pages/syllabus-exams

ICAN (2014). Regulations and Examinations Syllabus for The Institute of Chartered Accountants of Nigeria (ICAN). www.ican.ngr.org GFDBP (2013). Guidelines for Funding Defined Benefit Pensions, GFOA best practice, 2013.

Actuarial Standards Board (2010). Actuarial Standards of Practice No. 41, Actuarial Communications, December 2010 California Actuarial Advisory Panel (2011). Model Disclosure Elements for Actuarial Valuation Reports on Public Retirement Systems in California, December 2011.

GFOA (2013). The Role of the Actuarial Valuation Report in Plan Funding: Government Finance Officers Association. http://www.gfoa.org/role-actuarial-valuation-report-plan- funding

IAIS (2009). Issues Paper on the Roles of and Relationship between the Actuary and the External Auditor in the Preparation and Audit of Financial Reports: International Association of Insurance Supervisors, October 2009. www.iaisweb.org

20 Odomirok, K. C., McFarlane, L. M., Kennedy, G. L. & Brenden, J. J. (2014). Financial Reporting Through the Lens of a Property/Casualty Actuary: Publication of Casualty Actuarial Society. http://www.casact.org/library/studynotes/Odomirok-etal_Financial- Reportingv4.pdf Behan, D. F. (2009) "Statistical Credibility Theory", Southeastern Actuarial Conference, June 18, 2009

Gerber, H.U.; Shiu, E.S.W. (1997). "From ruin theory to option pricing" (PDF). AFIR Colloquium, Cairns, Australia 1997.

APPENDIX 1 Department of Actuarial Science Faculty of Management Sciences

21 University of Jos 31th August, 2015.

Dear Respondent

REQUEST FOR FILLING OF A RESEARCH QUESTIONAIRE

I am a researcher from the above named university, myself and five others are currently undertaking a research work on the topic “Accounting & Actuarial Science: An Empirical Search for the Meeting Point)”. Research is one of our duties as academics. I wish to remind you that accounting and actuarial science are disciplines that have to do with the impartation of knowledge of financial reporting and risk assessment/management. I forward here with a research questionnaire, which is one of the instruments to be used for achieving the success of the study. Therefore, I implore you to carefully read through this instrument and kindly indicate your opinion by underlining, ticking (√ ) (or as requested) one of the options given in each of the listed questions.

The research group and I will sincerely appreciate your kind cooperation and earliest response, please.

Thank you.

______Dr Yohanna G. Jugu (ACA, CFA) (Principal Researcher) RESEARCH QUESTIONNAIRE Section A (Underline or tick appropriately) 1. What is your profession?: (a) Professional Accountant (b) Actuary (c) Actuarial Scientist (d) None of the two 2. How long have you been practicing your profession?: (a) 0 – 5 Years (b) 6 – 10 Years (c) 11 – 20yrs (d) 21yrs and above 22 Section B (Underline, tick and fill the gaps as appropriate) 3. Does accounting have anything in common with actuarial science? Yes ( ) No ( ) 4. If yes, what are those common things between the two professions? List, please: i……………………………… ii…………………………….. iii……………………………….. 5. Can an Accountant do the work of an actuary? Yes ( ) No ( ) 6. If yes, to what extent? i. To a very large extent ii. To large extent ii. To small extent iii. To a very small extent 7. Can an Actuary do the work of an accountant? Yes ( ) No ( ) 8. If yes, to what extent? i. To a very large extent ii. To large extent iii. To small extent iv. To a very small extent 9. What are the common functions of a professional Accountant? List, please: i. ……………………… iii. ……………………… ii. ……………………… iv.……………………… 10. What are the common functions of a professional Actuary? List, please: i. ……………………… ii. ……………………… iii. ……………………… iv. ……………………… v. ……………………….. 11. Given the under listed business issues, to what extent can an actuary contribute to financial reporting. Note the Ranking and Tick appropriately, please: 4 = a very large extent, 3 = a large extent, 2 = small extent, 1 = a very small extent i. Employee benefit plans: 4 ( ), 3 ( ), 2 ( ), 1 ( ) ii. Investment appraisal: 4 ( ), 3 ( ), 2 ( ), 1 ( ) iii. Portfolio management: 4 ( ), 3 ( ), 2 ( ), 1 ( ) iv. Employees’ fidelity insurance arrangement: 4 ( ), 3 ( ), 2 ( ), 1 ( ) v. Profit forecast: 4 ( ), 3 ( ), 2 ( ), 1 ( ) vi. Audit risk assessment: 4 ( ), 3 ( ), 2 ( ), 1 ( )

APPENDIX 2 Table 1: Accounting Course Contents and Descriptions These courses are in addition to those specified in the common courses.

23 (a) 100 Level Category Credit Units Pre-Requisites (i) None

(b) 200 Level Category Credit Units Pre-Requisites (i) Economic Theory (Micro & Macro) Compulsory 3 (ii) Taxation I “ 2 (iii) Auditing I “ 2

(c) 300 Level Category Credit Units Pre-Requisites (i.) Financial Accounting Compulsory 3 2.5b(ii) (ii) Cost Accounting ” 3 2.5b(ii) (iii) Management Accounting ” 3 2.61c(ii) (iv) Taxation II ” 2 (v) Production Management ” 3

(d) 400 Level Category Credit Units Pre-Requisites (i) Advanced Financial Compulsory 3 2.5b(ii) Accounting (ii) Management Information ” 3 System (iii) Public Sector Accounting ” 3 (iv) Financial Management “ 3 (v) International Accounting “ 3 (vi) Auditing II “ 3 (vii) Business Policy “ 6 (viii) Analysis for Business “ 3 Decision Source: NUC – Admin & Mgt (2007)

Table 2: Actuarial Science Programme Course Content

These courses are in addition to those specified in the common courses. (a) 100 Level Category Credit Units Pre-requisites None

(b) 200 Level Compulsor y (i) Introduction to Insurance ” 6 - (ii) Advanced Mathematics ” 3 - (iii) Economic Theory ” 3 -

(c) 300 Level

24 (i) Mathematical Statistics ” 6 (ii) Life Contingencies ” 3 - (iii) Operations Research ” 3 - (iv) Theory of Interest ” 3 - (v) Risk Management ” 3

(d) 400 Level (i) Actuarial Statistics and ” 3 - Mortality Analysis (ii) Further Life Contingencies ” 3 - (iii) Theory and Practice of ” 3 Investment (iv) Pension Funds and Social ” 3 Insurance (v) Numerical Analysis ” 3 (vi) Business Policy ” 6 (vii) Analysis for Business ” 3 Decision Source: NUC – Admin & Mgt (2007)

Accounting Professional Body Course Contents Table 3: The course content of the Institute of Chartered Accountants of Nigeria (ICAN) is reviewed below With effect from November 2014, the qualifying professional examination of the Institute under the new syllabus consists of the following three levels: Foundation, Skills and Professional. NEW SYLLABUS

FOUNDATION LEVEL B3. Taxation A1. Quantitative Techniques in Business B4. Performance Management A2. Business and Finance B5. Public Sector Accounting and Finance A3. Financial Accounting B6. Management, Governance and Ethics A4. Management Information A5. Business Law PROFESSIONAL LEVEL C1. Corporate Reporting SKILLS LEVEL C2. Advanced Audit and Assurance B1. Financial Reporting C3. Strategic Financial Management B2. Audit and Assurance C4. Advanced Taxation C5. Case Study

Source: ICAN (2014)

Actuarial Science Professional Body Course Contents Table 4: The course content of the Institute and Faculty of Actuaries of the UK is reviewed below. Core technical subjects:

25 Subject CT1 - Financial mathematics Subject CT2 - Finance and financial reporting Subject CT3 - Probability and mathematical Subject CT4 – Models statistics Subject CT5 – Contingencies Subject CT6 - Statistical methods Subject CT7 - Business economics Subject CT8 - Financial economics Subject CT9 - Business awareness Core applications subjects: Subject CA1 - Actuarial risk management Subject CA2 - Model documentation, analysis and reporting Subject CA3 – Communications Specialist technical subjects: Subject ST1 - Health and care Subject ST2 - Life insurance Subject ST4 - Pensions and other benefits Subject ST5 - Finance and investment A Subject ST6 - Finance and investment B Subject ST7 - General insurance: reserving and capital modeling Source: Institute and Faculty of Actuaries (2015) Table 5: ANOVA TABLE SHOWING CONTRIBUTION OF ACTUARY TO FINANCIAL REPORTING Sum of Squares Df Mean Square F Sig. Employee Benefit Between Groups 6.825 3 2.275 4.112 .014 Plan Within Groups 18.256 33 .553 Total 25.081 36 Investment Appraisal Between Groups 24.009 3 8.003 19.024 .000 Within Groups 13.883 33 .421 Total 37.892 36 Portfolio Management Between Groups 4.991 3 1.664 4.328 .011 Within Groups 12.685 33 .384 Total 17.676 36 Employees’ Fidelity Between Groups 9.545 3 3.182 13.904 .000 Insurance Within Groups 6.636 29 .229 Arrangement Total 16.182 32 Profit Forecast Between Groups 15.073 3 5.024 9.987 .000 Within Groups 16.603 33 .503 Total 31.676 36 Grand Total 0.025

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